INVESTMENT ENVIRONMENT and its IMPROVEMENT TOOLS

INVESTMENT ENVIRONMENT IN MONGOLIAJAVKHLANBAATAR SEREETERDIRECTOR GENERALINVEST MONGOLIA AGENCYUlaanbaatar 2015.04.02

INVEST in MONGOLIAContentFDI flows: TOP 10 host and home economies /2013/Billion USD FDI inflow of Mongolia has been decreasing sharply

/in billion USD/The Ministry of Economic Registered foreign invested companies /by number of companies/The Ministry of Economic

Export of coal (million USD)

Export price of coal Reason 1: Main export commodity price dropped2011.012015.02Coal141.94$65.76$Metals245.48$137.27$Copper9533.2$5729$Iron Ore179.63$62.69$Reason 2:

Phase 1 of OT Project has completed

Investment Amount:

7.1 billion USD

OT investment has been the main reason for the rapid growth of FDI in 2011-2012

40 companies listed in International stock exchanges Reason 3:Strategic Entities Foreign Investment Law /2012/

Long Name Law /2009/

Presidential moratorium on new exploration licenses /2010/

Government Changes

Corruption Issues /in 2013 106 exploration licenses held by foreign and local investors were revoked as a result of a court case/ Arbitration cases

Court cases / Imprison cases

Tax disputesUnexpected Changes of Regulations Negative messages Unfavorable attitudes Uncertainty EASE OF DOING BUSINESS IN MONGOLIAAccording to the 2015 Doing Business report by the World Bank, Mongolia is ranked 72nd place out of 189 Economies DB 2015 Rank9Source: MIGA-EIU Political Risk Survey 2013Types of political risk of most concern to investors in developing economies in next 3 years /percent/INTERNATIONAL SURVEYS Key Findings of the WB and IFC survey in Mongolia /provisional report/The main investor concerns are caused by the certain government organizations:Lack of Transparency and Arbitrary Government Action Expropriation Discrimination Breach of ContractEven the investment is adequately protected in legal documents, investors do not feel the reliable protection. High degree of dissatisfaction to resolve investors grievances. Scenarios to 2021

INVESTMENT POLICY REVIEW/April 2014, UNCTAD/ Recommendations 21Resource curse and macroeconomic instabilityMining development hampered by national and international political and economic difficultiesInvestment in infrastructure constrainedMining revenues are put to productive useMacroeconomic stability attainedEconomy diversifies, infrastructure improvesSustainable and inclusive developmentForeign Investment Law(FIL)Remove the pre-establishment screening of FDIAbolish the need for investment certificatesReplace the minimum deposit requirementImprove the methodology for the collection of FDIRegulation of Foreign Investment in entities operating in strategic sectors (SEFIL)Replace the comprehensive pre-establishment screening with a proper national security testMongolias Investment Promotion Agency (IPA)Establish an independent, public sector-funded and private sector-oriented agencyRemove all regulatory functions, including screening and registration and assign proper investment promotion and facilitation functionsStaff the agency with professional and experienced personnelProvide the IPA with secure and adequate financial resources

1. New objectives and tools of a comprehensive FDI strategyPOLICY ACTIONS Sector diversification Geographical diversification Source country diversification Managing stakeholders interests More favorable condition Synergy between government institutionsCapacity building programmeSocial program to promote a positive impact of FDI Diversification 13Protection One stop online services Aftercare services Grievance management mechanism Facilitate procedural barriers Incentives Financial Incentives Fiscal Incentives Regulatory Incentives 13Expected investment from mega projects and PPP projects exceeds 18bln USDOT II PhaseInvestment: 5bln USD Investment Agreement TTInvestment: 4bln USD Investment Agreement is under negotiation TTPPInvestment: 1bln USD Investment AgreementPublic-Private Partnership Projects Total Investment amount : ~7bln USD The Government has signed 17 PPP agreements Telmen power plant project Altanbulag-Ulaanbaatar-Zamyn-Uud highway project Nariinsukhait Shiveehuren road project Establishment of the mining and metal processing complex project

Tuul-Songino power plant projectTavantolgoi-Khanbogd-Hangi road project 9 road projects with total length of 1167.6 km Projects for construction of 72 kindergarden and school complexes

CHP5Investment: 1.2 bln USD Concession Agreement Thank you for your attention

INVEST in MONGOLIAInvest Mongolia Agency Web: www.investmongolia.com Phone: +976-11-320706, 310599Email: info@investmongolia.com15